Subject: File No. S7-21-11
From: Paula A. Argento, Esq.

The SEC absolutely should extend the "bad actor" disqualifying provisions to Regulation D Rule 504 offerings which can result in non-restricted or "free trade" stock being issued immediately upon closing of such an offering.

Extending the disqualifying provisions to Rule 504 Offerings will not deter responsible companies and their advisors from raising needed capital under an appropriate Rule 504 raise. In fact this action will enhance the ability of counsel and other advisors to assess the credibility of those who may be ill advising an issuer and its principals. It will also give teeth to a recommendation by counsel or other issuer advisors that certain individuals and entities should be excluded from participation in an offering.

The Commission should also take the step and responsibility of maintaining a registry online of "bad actors." This will greatly help counsel, issuer advisors and the issuers themselves to make preliminary assessments of those who want to get involved with offerings.

Certainly, there could be the circumstance where one is mistakenly included on the "bad actor" registry. With appropriate precautions and a timely and streamlined method to resolve such errors, this should not be an issue.

An area that may be of issue, and this counsel will take more time to review the Commission's proposal in depth in this regard, is to what extent a bad actor should be excluded from any participation in investing in a company without a full securities registration of the offering(presuming the "bad actor" would legally able to hold stock under a full registration scenario).

The desire to see the issuer succeed in its business plan is typically not the most prevalent intention of a "bad actor." Nevertheless for the sake of argument, say a "bad actor" is related to a principal of the issuer, for example, a father and son, or a husband and wife. Say the "bad actor" legitimately wanted to invest to help the issuer's business prosper. Could a special streamlined notice registration be created if the "bad actor" took restricted stock for two years, and if there were a certification by the issuer and the "bad actor" that the latter would have no involvement with stock promotion or investor relations, 10b-5 violations, market manipulation, or other violations of state and federal securities law?

Such a short form notice registration would get word to the Commission and to the public about the restricted participation of the "bad actor" while allowing the exempt offering to go on for other legitimate investors. Rest assured, I think such situations may be few and far between, but at least the Commission and the public would have a mechanism for getting the disclosure of such situations up front. It would also give added impetus for the issuer and its advisors to approach any such investment in a straight forward and disclosed fashion.

Here is a suggestion that might help your efforts to eradicate fraud in general. While not suggesting that the SEC go full time into the "motion picture business," it might be helpful for the Commission to produce a short "horror" movie depicting how "bad actors" may work to gain confidence from an issuer while they are pursuing their own illegal agendas. Those illegal agendas and the harsh potential consequences of them also could be shown in action.

Such an online video could be a useful tool for counsel and other advisors to educate and protect new issuers who can be so intent on raising money for their survival and growth that they turn a deaf ear to sound outside advice.